Where does the money go?

Shift to totex

Inside

With the shift to totex (total expenditure), the industry’s thinking must move to making risk-based interventions beyond capital replacement, such as extending the life of an asset.

In addition, creative thinking is needed, such as innovative low capital solutions that also need less electricity, chemicals, and so on. In order to mitigate this risk, utility companies need the right systems and policies and an asset management team working to the correct asset management ethos.

The traditional view of what a water company does (delivers potable water, collects wastewater) is moving to viewing the business as providing three distinct services, with the third being generation of energy from sludge.

Other sectors, such as retail, are already advanced in the way they make whole-life investment through their asset management processes and systems.

One reason for this is that they have invested in collecting the information and have carried out the necessary modelling for accurate investment decision-making. In order to run their assets most efficiently, water companies need to understand asset running rates, costs and conditions to allow planned maintenance to be carried out insteadof more expensive and disruptive reactive maintenance.

Improving management decisions

The effectiveness of management decisions is directly linked to the accuracy of the information they are based on. Maintaining and improving the operational information upon which totex decisions are based can give water companies a competitive advantage. Understanding where to prioritise asset investment to gain the greatest totex return, and being able to demonstrate to regulators that investment is clearly justified in best serving the public interest, is of paramount importance.

An excellent example of this is reducing asset failures through a better understanding of asset performance and condition. Perhaps as important is the ability to demonstrate the rationale behind capital investment decisions to regulators, shareholders, and the public.

A further example is the change to viewing sludge as a product that can generate a saleable resource – energy – which requires new levels of information (such as quantity and quality of sludge in the system).

One more example is viewing water and wastewater assets as integrated. This involves using data, analytics, visualisation, and decision support tools to help staff make more holistic, risk-based decisions about the system to deliver better outcomes such as quality or cost of delivered water. Key drivers here will be optimising inputs such as electricity, chemicals and labour – all of which can be big drivers of unnecessary opex.

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